Facebook Gets a Multibillion-Dollar Tax Break

Source: Bloomberg Businessweek

Even though Facebook (FB) reported $1.1 billion in pre-tax profits from U.S. operations in 2012, it will probably pay zero federal and state taxes—and even receive a federal tax refund of about $429 million—according to a Feb. 14 statement from Citizens for Tax Justice.

The tax-research and -lobbying organization says companies such as Facebook should treat stock options the same in their reports to shareholders as they do in their tax filings. Citizens for Tax Justice calls the tax footnotes in Facebook’s Jan. 30 financial statement “an amazing admission,” but there’s nothing illegal about the breaks the company is claiming. Companies like Facebook are allowed to treat the cost of non-cash compensation, such as stock options, as an expense that reduces profits, essentially the way they treat cash compensation such as salaries.

The difference is that Facebook—unlike, say, General Motors (GM)—relies heavily on stock options and restricted stock units as a form of compensation. It paid out a lot during its years as a private company that it must now recognize on its income statement and balance sheet.

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Facebook says that it anticipates reducing its tax liability in the future by an additional $2.17 billion by using further net operating loss carry-forwards that it has banked.

5. Think instead of how you will benefit from the social network

6. I have a real social network.

It includes flesh and blood friends, colleagues, and family that I am present with in meaningful ways every day. That is a real social sphere.

It is impossible to connect to large groups and have meaningful connections. They are shallow and superficial. There is no time for depth and intimacy when you have more than a hundred friends to 'check-in' with daily.

These connections are based on the persona and not the heart or the mind. A persona is very necessary. It is our first presentation to the world, however, Facebook (and really all social networking) is persona only all the time. If the ego only identifies with the persona then narcissism develops. The persona is all that anyone sees. And the narcissist needs the constant interaction to mirror back a self as there isn't one once the surface is scratched deep enough. Look, we are 'friends' because we like the same music. We are 'friends' because we like the same politician. We are 'friends' because we dislike chocolate ice cream. I can not have a meaningful conversation in the 140 characters of a Twitter tweet.

We need to drop that persona from time to time and disconnect from that 'social sphere'. It allows us in solitude to discover vast depths to our being beyond that of my 'job', my 'stuff', my 'likes and dislikes', and my 'friends wall'. It also allows us time to truly connect with those around us. A simple smile and a hello in a coffee shop is a rare thing these days with everyone checking their Twitter and Facebook on their iDevice mumbling without making eye-contact.

Real friends have boundaries as well as openness. Generation over-share has not learned the value of the first and the consequences of the second. I do not need to know that my 'friend' is struggling with his weight and obviously is having an affair with his secretary based on the photos on his 'wall'. If he and I are going to discuss such intimacies, let's do it in person or at least over the phone in a private conversation. How many young teachers have to get fired because they were stupidly sharing 'party' pictures from their summer vacation?

There is limited if any real benefit to be derived from social networking. With a professional website, I have no need for it even as a marketing or advertising tool. Unless I am targeting people outside of my state or even my city, what value then? Who cares if some young woman in China 'likes' my business? I won't see her as a client locally.

So I will leave you with some excellent articles about just how great social networking really isn't.

9. I haven't read such a good DU post in a long time.

Most are 1 and 2 sentence tweets, these days.

These connections are based on the persona and not the heart or the mind. A persona is very necessary. It is our first presentation to the world, however, Facebook (and really all social networking) is persona only all the time. If the ego only identifies with the persona then narcissism develops. The persona is all that anyone sees. And the narcissist needs the constant interaction to mirror back a self as there isn't one once the surface is scratched deep enough. Look, we are 'friends' because we like the same music. We are 'friends' because we like the same politician. We are 'friends' because we dislike chocolate ice cream. I can not have a meaningful conversation in the 140 characters of a Twitter tweet.

Interesting. I suppose that means the vast majority of our politicians are all persona and no substance. Viewed that way, it provides a rationale for why we hear one thing on the campaign trail, only to find they later do something else once elected to office. They were all persona and no substance.

I suppose TV presents a similar phenom, all those pretty faces, immaculately dressed and manicured, etc., with loads of support staff, staff that is rarely shown. I wonder what watching TV, even just the news, does to kids, specifically, what kind of role model does a latch-key kid have these days, if those role models are all largely 'perfect persona'.

How this fits into a social network is largely a curiosity to me, I never joined facebook, either. In the early days, connecting to their pages almost always broke my computer, requiring some time to repair. Maybe it's different today.

Back to the topic, it's mighty unfair that personal expenses aren't deductible for citizens, while zillions of deduction schemes seem to exist for corporations.

18. Thank you Trillo.

Yes, I would agree that indeed most of our politicians are narcissistic. They are concerned more with the 'votes', their polling numbers, and what they are personally getting out of being in Washington, as opposed to genuine concern for the welfare of those they represent. The numbers have only grown worse in the last few decades. Just observe the rise of the Tea Party.

10. So does everyone else. Facebook connects me with even more friends more frequently and is political

Facebook provides me with a news feed from all my Congress critters, Dem parties in my state, county, other states, activist organizations, academic interests, more. It is a tool you decide to use the way you want. I'm not monitoring weight or affairs!

13. You didn't read those links, did you?

Nor did you get the point of my post as most people do not have real social connections on Facebook.

For you, it is about politics which is not necessarily about 'friendships'. That's fine. Your choice if you want to use it.

Again, I would see no pressing need even from a political vantage. For example, I don't need to see every day what my Congress man or woman is or is not doing.

Even if you wish to fall back on the canard that it is just a 'tool', Facebook uses you as a tool far more than you use it. You have no privacy. You are constantly a part of a marketing shtick. And as this article points out, you allow Facebook to make billions in profit and avoid any taxes.

I have a choice, and after careful consideration of the pro's versus the con's, I have made a firm decision to not ever use Facebook. It is just not worth it.

14. You are welcome.

19. The Strive For Popularity

Some feel more is better. The more names you have on your list means you are more popular,more loved,more successful,more beautiful etc. FB is one of those places where you can make up your success stories or what you did or didn't do on Saturday night. You can handle rejections better when not in person. One key stroke and that person can be out of your life. If only real life was that simple!

20. Well said!

I am often amazed how about much dishonesty there is online. People are braver, more confrontational, more popular, successful, etc. In adolescence it is so important at that developmental stage to be popular and included. Social networking makes it so easy to perpetuate that level of immaturity well beyond its shelf-date.

Sadly, it is becoming that simple in 'real' life. I have seen more and more clients in the last few years, particularly young one's, who are ending friendships and relationships with an email at best and a text message at worst. That's it. One click of a button and a multiple year friendship or romance is gone. Just delete them from your cyber-life and go find another. It truly saddens me deeply.

15. seems perfectly legal to me

"Companies like Facebook are allowed to treat the cost of non-cash compensation, such as stock options, as an expense that reduces profits, essentially the way they treat cash compensation such as salaries."

That looks perfectly legal and rational to me. Stock options are like salary in that regard. I hope nobody complaining in this thread takes the deductions on Schedule A.

And before getting worked up about the refund, note that it's their own money that they're getting back, presumably from estimated tax payments.

While a major amount of our tax dollars are thrown right into the sewer on unnecessary wars, I'll happily pay as little as possible.